The controversial initiative to replace failing inner-city schools with privately backed academies is coming under increasing pressure amid fresh evidence that the programme is running over budget and failing to improve standards.

This week the government produced a glossy prospectus in an attempt to attract new sponsors to invest in the scheme. But a damning report from the Commons education select committee overshadowed the launch and rumblings of discontent are expected to spill over when teachers gather at the start of Easter conference season next week.

The academy programme is one of the government's most divisive proposals for reforming state education. Private sponsors give £2m in return for a large degree of control over the school's curriculum, ethos and staffing.

Opponents say the scheme puts too much power in the hands of the sponsors and point out that despite massive investment, many schools have failed to improve results. Ministers insist it is too early to judge the schools, some of which have been open for little more than a year. They say they are making progress in some of the country's deprived areas.

But the select committee report called on the government to scale down the programme until it had been properly evaluated. It backed claims that many academies had not improved results and said billions of pounds were being spent on an untested initiative.

Steve Sinnott, the general secretary of the National Union of Teachers, said the academies' programme would be a priority at the union's conference. He described the initiative as "immoral" and said the union planned to set up local campaign groups to oppose each new school. "This is an experiment in children's education," he said. "It is creating a situation in which the academies become schools that are more attractive to parents who have higher aspirations and more skills to find their way round the education system."

Last month a confidential government report obtained by the Guardian under the Freedom of Information Act supported his view, warning that the new academies threatened to create a two-tier system based on social class. The document commissioned from PriceWaterhouseCoopers was based on a study of similar schools in the US and said academies would introduce a "quasi-market" in education.

The academy initiative was launched in 2000 by then education secretary David Blunkett, as a "radical approach to promote greater diversity and break the cycle of failing schools in inner cities". There are 17 schools up and running and the government hopes to create 200 by 2010 at a cost of £5bn - almost two-and-half times ministers' original estimates.

The first academies opened in 2002 and the government said each would cost £10m, with private sponsors contributing 20%. The latest figures from the Department for Education and Skills show that the average cost is more than £25m compared to the DfES own estimate for a new school building of £14.6m.

The private sector sponsors, who were initially asked to contribute 20% to the costs, have had their outlay capped at £2m - as little as 5% in some cases. This week's select committee report stated that the government is spending £21,000 per pupil at academies compared with just under £14,000 at other new schools.

The school's performance came under renewed pressure this week when new figures showing the performance of 14-year-olds in English, maths and science revealed that the majority of the new academies languished among the worst 200 schools in England. The tables follow last year's GCSE results which revealed that almost half of academies failed to show any improvement.

The Academy Sponsors Trust said the schools were raising standards at GCSE and at 14 and dismissed the select committee criticisms. "Academies have replaced failing schools in disadvantaged communities that have repeatedly proved immune to improvement in the past. The energy and vision of sponsors is now mak ing a dramatic difference," said chief executive Rona Kiley. "I believe it would be immoral to allow another generation of children to miss out on educational opportunity for the sake of testing a model that we know already works".

Phil Willis, the Liberal Democrat education spokesman, said it was time to reassess the entire project. "The academy programme is fast becoming a £5bn flop," he said. "[It] has been rushed through by the prime minister without consultation, research or even an evaluation process. It appears to based on blind faith."

Adding and multiplying

· There are 17 academies up and running and 36 more in pipeline. By 2010 the government hopes 200 schools will be open or in the later stages of development

· Academies cannot charge fees, but they stand apart from the state school system. In return for £2m the sponsor can appoint most governors and senior managers and influence the ethos of the school

· Each academy must teach the national curriculum core subjects, but they are "free to adopt innovative approaches to the content and delivery"

· The taxpayer contributes an average of £23m to each school and pays all subsequent running costs. By 2010 the scheme is expected to have cost £5bn

· GCSE results are higher in academies than in the schools they replaced. The average number of A*-C passes last year was 30% compared with 16% in predecessor schools. But figures published in January showed that just under half did not improve, or did worse